Win over plan sponsors by going deep on fee levelization – a 3-step approach (case study)

Fee levelization — or fee equalization — is a hot topic these days. In fact, retirement-focused advisors rank ‘equalizing fund revenue’ among their top five criteria when choosing a service provider[1]. Unfortunately, advisors don’t seem to be turning the interest into opportunity.

But in my opinion, advisors are in a great position to provide education and guidance on the topic. And our research suggests plan sponsors need it. Recognizing this opportunity, here’s how one 401(k) advisor team we work with uses levelization to win over clients.

3-step approach to plan administrative fee levelization

With 150 clients and $5 billion in retirement plan assets, this 401(k) advisor team wanted a new way to increase assets and retain current clients. In client meetings, they continually heard “managing fiduciary responsibilities” topped the list of client concerns. They decided to turn the concern into an opportunity with this 3-step approach:

Step 1: Identify existing clients and prospects not levelizing or equalizing retirement plan administrative fees.

Step 2: Set up meetings with existing and prospective clients. Have candid conversations about how fees are shared with participants and how it relates to their fiduciary duties. Use each meeting to learn more about the impact of fees on the participants and specifically demonstrate how fee levelization can help mitigate risk.

Step 3: Develop a recommendation for each client. Present several fee levelization options and talk through the considerations of each.

The results

In just seven months, the team garnered some impressive results:

  • Added 18 new clients
  • Gained $1B in new retirement assets
  • Reinforced their expertise with current clients

What’s their secret? The firm credits having deep, meaningful conversations ahead of their competition (i.e., the incumbent retirement plan advisor) about how participants pay fees. There’s no one right option, but the discussion alone establishes trust and shows credibility. And that may go a long way for future opportunities.

Put this approach to work for you

Get ahead of your competition today by capitalizing on fee levelization conversations with your clients. Start by educating your clients about revenue sharing and, fee levelization options and considerations. Consider using the tools and resources located at the bottom of this webpage to help.

For more information and actionable tips, view our recent webinar.

[1] BrightWork Partners, “Absolutely essential criteria”, 2017.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

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